While Microsoft has placed strict regulations on CableCard equipped systems, it will not hinder Media Center Extender capabilities. AMD claims:

With the new ATI TV Wonder Digital Cable Tuner, consumers can watch live or record high-definition broadcasts to preserve in a video library or stream to their Xbox 360™, if permitted by the content provider. Powered by AMD Avivo™ image technology, consumers get outstanding picture quality and smooth playback of their premium HD digital cable TV content on their media center PC, beyond basic cable channels, traditional analog TV and free over-the-air HD channels.

The TV Wonder Digital Cable Tuner will tune into most broadcast sources including NTSC, ATSC over-the-air and QAM encrypted ATSC. AMD’s Theater 550 Pro decoder that is also found on AMD’s TV Wonder Elite delivers analog tuning capabilities. An AMD NXT2003 decoder takes care of ATSC tuning. While the TV Wonder Digital Cable Tuner will tune into regular cable broadcast and over-the-air antenna signals users are required to contact their cable company to obtain a CableCard for premium channels such as HBO.

AMD will provide three versions of the TV Wonder Digital Cable Tuner -- external, PCI and PCIe. All three models interface with the system via USB 2.0 though. External models connect using standard USB 2.0 interface and require power from its own power supply. PCI and PCIe models only use the physical slot for retention purposes and require power through a floppy-drive power connector. The internal interface is still USB 2.0 on PCI and PCIe models.

Expect the TV Wonder Digital Cable Tuner to be available in OEM systems when Windows Vista ships on January 30th, 2007.

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Correct me if I'm wrong but didn't the US Supreme Court make broadcast flags illegal and thus ban them? I remember when everyone was screaming to go buy a TV Tuner card before they started coming out with the broadcast flag enabled but then the Supreme Court overruled the decision.

Ultimately if you can see it, you can record it. The decryption is handled through the cable box. Once its output to the TV, they can't control what you do with it. Same for TV Tuners.

Technically it was a federal appeals court, and what they actually ruled was that he FCC had no authority to force electonics makers to obey broadcast flags for Over-The-Air receivers in the public airwaves. The verdict was that the FCC can't control the electronics companies.

In the end, this has no effect for digital cable subscribers whom don't get similar protection, since cableTV is subscription and not considered "broadcast". CableTV is still very heavily subject to CableLabs certification, which itself is made up of a coalition of the -- you guessed it -- cable operators.